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March 14, 2013

LTCI Benefits Exceed $6B in 2012

Majority of new claims are from women

Insurers paid $6.6 billion in long-term care insurance benefits in 2012, according to the American Association for Long-Term Care Insurance. Approximately 264,000 people received benefits.

"At a time when so much is written about rate increases and changing markets, there is no more important story to tell than the fact that the nation's long-term care insurers pay claims, and lots of them," Jesse Slome, director of AALTCI, said in a statement.

The most common reasons for claims to be paid were for Alzheimer’s disease, stroke, arthritis and cancer. The report noted that benefits covered people who were receiving in-home care as well as those at nursing homes and assisted living facilities. In fact, in-home care accounted for about half of all new insurance claims. "People associate long-term care with nursing home care but insurance actually enables many people to remain at home when care is needed," Slome said.

About two-thirds of benefit recipients were women, AALTCI found, who could find they’re paying more for LTCI in the future. Washington Bureau Chief Melanie Waddell reported on Feb. 20 that some insurers, notably Genworth, are looking at gender-based pricing for their LTCI policies.

AALTCI released on March 7 its 2013 National Long-Term Care Insurance Price Index, which shows a 55-year-old will likely pay $2,065 per year for $162,000 in current LTCI benefits and $330,000 at age 80. In 2012, the same coverage cost $1,720 per year. A couple where both spouses are 60 will pay $1,816 per year for $162,000 of coverage per person. "Persistent low interest rates and yields on fixed-income investments continue to push costs for various insurance products higher,” Slome said.

Also pushing policy rates up is the higher cost of care over all. Genworth found that the cost of a semi-private room in a nursing home increased nearly 4% in 2012 and 4.5% over the past five years. The price for a room in an assisted living facility increased 1.19% in 2012 and nearly 6% over the past five years.

The index examined rates at 12 insurers and found a great disparity in rates for similar coverage. A 55-year-old could pay 87% more at the highest-priced insurer than at the lowest. For a couple, the disparity between the highest- and lowest-cost insurer was 92%.

"There is no one-size-fits-all policy choice that suits everyone," Slome said. "Some protection is always better than none, and coverage that does not include a costly inflation growth option is an affordable option."

Slome noted that some insurers are trying to make their policies more flexible, offering a future purchase option which allows applicants to increase their benefits periodically. Slome said an FPO can increase the cost by about 5%, and the index found a 40% differential between the highest- and lowest-priced policies with this option.

"A good long-term care insurance option takes into account the future availability of savings, Social Security benefits and investment retirement income to supplement insurance coverage," Slome added. "Increasing benefits are not an option that everyone today needs or wants to pay for."